Introduction
Historical development of organisational structures
Organisational Structures
Dr Rajeev K Bali
M40IS IS/IT Change Management, © Dr RK Bali
THE GODFATHER (1972)
Simple Structures
Run by the personal control of an individual
Traditional owner managed firm of Adam Smith’s day,
eg. Joe Bloggs and Son plumbers
Little formal demarcation of functional activities
Number of employees is small as the organisation
structure can only operate effectively with a low number
of employees
M40IS IS/IT Change Management, © Dr RK Bali
Functional Structures
Advantages
• Chief Executive is able to keep in touch with all
operations
• Simple/reduced control mechanisms
• Clear definition of responsibilities (goals and tasks)
• Specialists at senior and middle
management levels
M40IS IS/IT Change Management, © Dr RK Bali
Different structural types
Key strategic principles of organisational structure
Centralisation -v- Devolution organisation control
Organisational configurations in practice
M40IS IS/IT Change Management, © Dr RK Bali
Functional Structures
Based on the primary activities that have to be carried
out (production, finance, marketing etc)
M40IS IS/IT Change Management, © Dr RK Bali
Functional Structures
Disadvantages
• Senior managers may become overburdened
with routine matters
• Senior managers may neglect strategic
issues
• Organisational form does not cope well with
diversity
• Co-ordination between functions may be
difficult to achieve
• Failure to adapt because individuals
concentrate on their specialist functions
M40IS IS/IT Change Management, © Dr RK Bali
 Multidivisional Structure Multidivisional Structure

Subdivided into units (divisions) on the basis of Advantages

products, services, geographical areas or the process of • Concentration on the business area (eg.
the enterprise product/market)
• Opportunity for focus and specialisation
• Performance of each division can be
measured
• Ease of acquisition of different divisions
• Senior manager’s attention towards
strategy

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Multidivisional Structure Matrix Structure

Disadvantages Combination of structures which often take the form

of product and geographical divisions or functional
• Possible confusion over locus of responsibility and divisional structure operating in tandem
(centralisation/devolution)
• Duplication of effort across divisions
• Sacrifice of opportunities for synergy
• Lack of co-operation between divisions
• Tension between centre and lower tiers?
• Complexity of co-operation in too many
divisions

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Matrix Structure Matrix Structure

Advantages Disadvantages

• Quality decision making where there are conflicts of • High risk of dilution of priorities, not all
interest matters are equal
• Direct contact replaces bureaucracy • Longer time-spans in making decisions
• Increased managerial motivation through increased • Where does responsibility lie, whose
involvement in decisions accountable for profitability?
• High degrees of conflict
• “Creeping bureaucracy”

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 Key Principles
Small organisations tend to have limited resources
but an informal structure, allowing flexibility in
response, but giving unclear lines of responsibility
The functional (unified) organisation has been used
mainly in small to medium-sized organisations with
one main product range.
As firms develop further ranges of products, it is
often necessary to divisionalise them.
Each division will then have its own functional
structure
M40IS IS/IT Change Management, © Dr RK Bali
Centralisation -v- Devolution
Devolution: extent to which the centre of an organisation
delegates decision making to units and managers lower
down the hierarchy
Reasons for the drive towards devolution
• Financial pressure on public/private organisations
• Centralisation may lead to top managers becoming
detached from the “sharp-end” of business
• Overcentralisation results in organisations becoming
too concerned with internal matters
• A response to historical overcentralisation?
M40IS IS/IT Change Management, © Dr RK Bali
In Practice...
Most organisations are a hybrid of different organisational
structures
Has been a trend towards devolution of decision-making,
the centre still has an important role to play
Costs associated with structural change:
?Loss of control
?Damage to employee motivation
?Lack of clarity in communication
Legacy problems of organisational culture
(can’t change the way people think overnight)
M40IS IS/IT Change Management, © Dr RK Bali
Key Principles
If an organisation’s product ranges becomes highly
diverse the centre may become a holding company
The matrix organisation is an alternative structure
for companies with several product ranges, where
joint responsibility is held by two different
structures, eg. between product divisions and
another organisational structure such as
geographical or functional divisions
The locus of strategy development in an
organisation depends on organisational
structure
M40IS IS/IT Change Management, © Dr RK Bali
Adding Value
Improving efficiency (economies of scale etc)
Providing expertise in specific functions (eg
personnel)
Providing investment (finance and competence
building)
Fostering innovation (coaching of people/managers)
Risk reduction (large scale of combined operations)
Provision of strong external image through size
Encouragement of collaboration of effort
Setting standards by which individuals
and units may be assessed
M40IS IS/IT Change Management, © Dr RK Bali
Summary
Major organisational structures
Key principles
Centralisation -v- Devolution organisation control
Adding Value
M40IS IS/IT Change Management, © Dr RK Bali